Sensex, Nifty Rise After 3 Days of Gains: What's Driving the Market?

Top Summary

• What happened: Nifty50 and BSE Sensex opened in green, continuing gains for the third consecutive day. Nifty50 was above 25,850 and Sensex rose over 100 points in early trade.
• Why it matters: Improving global cues and sector-specific domestic developments are supporting market sentiment. Experts anticipate a firm market with an upward bias.
• What changes: The comeback of mid and smallcaps is noted, attracting investor attention. Selective accumulation of these stocks is observed at the institutional level.
• Who is affected: Investors, particularly those focused on mid and smallcap stocks, as well as those in financials, autos, capital goods, pharmaceuticals and hotels.

Market Open and Early Trends

Indian equity benchmarks started on a positive note. At 9:18 AM, Nifty50 was trading at 25,861.55, up 42 points or 0.16%. The BSE Sensex was at 83,854.33, up 120 points or 0.14%.

The stock markets have extended their gains for the third straight session on Wednesday. This is amidst improving global cues and sector-specific domestic developments that are supporting sentiment.

Expert Insights on Market Dynamics

Market experts anticipate the markets to remain firm with an upward bias. This expectation is guided by global cues and domestic sector-specific developments.

According to Dr. VK Vijayakumar, Chief Investment Strategist, Geojit Investments Limited:

"An important takeaway from Q3 results is the comeback of the mid and smallcaps. Improvement in earnings recovery and indications of continuation of this uptrend have brought the mid and smallcaps back to the radar of investors. At the institutional level, there is a trend of selective accumulation of mid and smallcaps. Even mutual funds which had flagged the valuation concerns of the mid and smallcaps have started approaching the segment with optimism."

Valuation Concerns and Stock Picking

Largecaps offer valuation comfort, while mid and smallcaps are trading at higher valuations. Nifty is trading at around 20 times FY27 estimated earnings. The NSE midcap and NSE smallcap indexes are trading at 28 and 24 times estimated FY27 earnings.

This market is considered a stock picker’s market. Prospects for financials, autos, capital goods, pharmaceuticals and hotels look promising.

Global Market Influences

Wall Street finished in the green. This was led by a rise in major technology stocks like Nvidia and Amazon after recent volatility linked to artificial intelligence concerns. Nvidia gained 1.6% after announcing a multi-year agreement to supply millions of its current-generation chips to Meta Platforms.

Asian markets also moved higher. This followed the rebound in technology shares and strong US economic data, which boosted investor confidence. Oil prices retained gains after registering their sharpest rise since October.

FII and DII Activity

Foreign portfolio investors (FIIs) were net buyers of equities worth Rs 1,154 crore on Wednesday. Domestic institutional investors (DIIs) purchased shares worth Rs 440 crore.

US Dollar Strength

The US dollar steadied on Thursday. It held on to recent gains after minutes from the Federal Reserve indicated policymakers were not in a hurry to lower interest rates. Some remained open to rate hikes if inflation persists.

What to Watch Next

Investors should closely monitor global cues, particularly developments in the US market and movements in oil prices. Further, keep an eye on sector-specific domestic news, focusing on financials, autos, capital goods, pharmaceuticals, and hotels to make informed investment decisions.